Real Estate Broker · Pinellas County · Member since 2016 · 166 posts · 114 votes
Where are we headed for 2020? What do you think the trends are? Where are the next new areas to invest in?
My thoughts and experiences. The trend of population migration into the south will continue. Southeast is starting to see lower returns. Most of Florida and Georgia I’m seeing very low returns. Northeast still high but might take a dip but I’m not sure if it will be enough. NY politics worry me.
Not too much knowledge on the west or mid west states. Maybe these are the next areas to get into?
Get to know an area and opportunities will become more commonplace. Look at the opportunities with a property that others haven’t. I don’t see any softening where I’m at. At least at the moment and don’t anticipate any in the near future.
@Erik Hatch I went to Michigan and Indiana border area last year. Areas seemed pretty tough mostly D properties that I’m not into. I think B and C are key. But I did want to revisit Indiana I think there are a few good areas
Wisconsin has a lot of investment from large corporations such as Foxconn, Epic, Exact Sciences, Northwestern Mutual, Oshkosh, etc that have been increasing their local workforce’s by thousands every year.
Deals can be found at 8% cap rates and every market I’m currently in has seen at least 3-5% natural appreciate, and we’ve realized force appreciation of 10-15% in some cities.
I agree in Illinois, they’re bound to be bankrupt at some point...
Iowa is a similar market to Wisconsin, I’m not sure about Minnesota.
Thanks @Arthur Panagopoulos for starting this thread! Sure deals can be found in every market but for someone who is looking to invest out of state, "every city" is to broad of a starting point.
@Chris Gantz Great information! Unless it’s an A property I think 8% cap is low. Maybe I’m wrong. I’m getting 15%+ but I have them several years. Are double digit returns nonexistent these days?
@Bryan Mitchell good to know! Apartment buildings I have seen are not offering great returns. I’ll have to take a closer look.
I like secondary markets best. Often times there’s too much competition in the big cities. You sort through hundreds of properties and focus on a few. By the time you put in an offer, there are multiple offers already in. “Submit your highest and best offer” they say. One’s attention can slowly get attrited after a few of these. And if you have a demanding career outside of RE not to mention a busy family life, you just don’t have a lot of time to waste. Best to fish in a stocked pond.
I live in Silicon Valley and have 4 properties in SF...
While I am of the view that RE has peaked in 2018 and has been and will be on a down slope for the next 2-4 years, I also believe opportunities exist in every marker if you understand the market and look hard enough ....
I bought a small condo in prime SF location in 2019... with 10% down I am cash neutral.... tenant is a google employee making $200K annual....
I got lucky because sellers was OOS....
So if you look hard, “once in a lifetime” deal will show up every 6 months....Lol
@Diane G. That’s great to hear! I’m with you I got one of those type of deals last year but I want more! Lol. Another issue I have I live in 3 places so I miss some deals. Good luck in 2020!
Where are we headed for 2020? What do you think the trends are? Where are the next new areas to invest in?
My thoughts and experiences. The trend of population migration into the south will continue. Southeast is starting to see lower returns. Most of Florida and Georgia I’m seeing very low returns. Northeast still high but might take a dip but I’m not sure if it will be enough. NY politics worry me.
Not too much knowledge on the west or mid west states. Maybe these are the next areas to get into?
In last couple of yrs I have realized that the returns on paper are most often not realized in practice because of two reasons:
a) Quality of tenants
b) Quality of management.
Quality of tenants is directly dictated by location. I would rather buy in a good location with good tenant pool for lower returns, than in an undesirable area with high on paper returns (which can often turn out to be lower returns in reality).
Quality of management is directly dictated by who is managing the property. When you hire a PM, usually he/she will end up making all the money.. No one can manage the property better than you, yourself.
Personally, I learned these lessons the hard way. I had some class A, B+, C and D properties. I sold off Class C and D (long distance) properties and invested money in Class B properties for less but steady returns I am no rookie managing properties, as I have had A & B properties way before I purchased my class C & D Properties.
As a disclaimer, I do have a full time job that pays very well. I love my career, and absolutely have no desire to do Real Estate full time. I invest for creating wealth and of course added tax benefit. At retirement, which is about 30 yrs away, I will have a lot more WITH real estate than I will WITHOUT real estate.
So this year, I will buy close by if i can find a good deal. Maybe even partner up with someone.
I try not to invest in areas because they're cheap, I want to be investing where population is growing and landlord laws are friendly. It is a seller's market most places right now, so folks are going to worse markets to look for better numbers.
Where are we headed for 2020? What do you think the trends are? Where are the next new areas to invest in?
My thoughts and experiences. The trend of population migration into the south will continue. Southeast is starting to see lower returns. Most of Florida and Georgia I’m seeing very low returns. Northeast still high but might take a dip but I’m not sure if it will be enough. NY politics worry me.
Not too much knowledge on the west or mid west states. Maybe these are the next areas to get into?
In my opinion, charge of same investor climate of 2019. Multi-family and industrial continuing to be the hot sectors. Development for MF in infill locations, smaller spaces, smaller square footage. Cost to build only getting higher so perhaps slow down in development. I think Midwest and other fly overs will start to see a more climb in desirability. Coastal markets will only get more expensive and capital will move out.
@Chris Gantz what areas in WI? Feel free to PM me.
I looked there for a bit. It seems Kenosha/Racine cashflow but are very poor in the areas with rentals. Out of the 10 showing I went on two different tenants were telling us how they couldn't afford the low $700 rent, etc. I am a realtor all over Chicago and really never experienced poverty like that. Even in our rough areas people have nicer cars, are able to afford higher rent, etc. Lots of these properties are selling at 200-400% of their 2012-2014 prices when look at records with no work done.
The nice parts of Milwaukee seem to not cashflow right now at all. Maybe west of Milwaukee in the suburbs?
I like the state and see the growth with Foxconn, etc. but did not see much good opportunities.
Areas I’ve found great multi family deals are around Tomah, Baraboo, Monroe, and the greater Madison markets.
We don’t have anything in South East, WI, I’ve always heard the same stories and stigmas from those areas that you mentioned. I’d look around Waukesha and Brookfield areas mainly if I were to trying to get into the South East market.
Madison is growing a lot, but it’s difficult to find a decent deal on market right now. Everyone seems to be posting around 6% cap rates. Madison bedroom communities like Sauk City have a lot of untapped potential...
I try not to invest in areas because they're cheap, I want to be investing where population is growing and landlord laws are friendly. It is a seller's market most places right now, so folks are going to worse markets to look for better numbers.
This is always the winning formula. Landlord friendliness helps, but the most important thing is population growth/size, economic drivers, and economic diversity.
I would always recommend buying what you can afford. The Midwest is great for a lot newer investors that don't have a ton of money to put down. Cap rate in the 7s with good appreciating upside. People are heading more and more to cities that are more and more progressive. Follow the population growth.